'Brief Answers to Big Questions' - Stephen Hawking's final book

The Summer reading list for 2019 included the final book of renowned physicist, Professor Stephen Hawking who had died in March 2018.  The book is essentially a collection of answers to various critical questions drawn from Hawking's archive and accumulated over many years. In addressing the varied issues, Hawking and his assistants have sought to compile answers to complex yet widely asked issues such as: is there intelligent life in the universe ? Can we predict the future ? Is time travel possible ? Will artificial intelligence outsmart us ?

Most telling, Hawking also confronts the most immediate concern of climate change  and the environment directly by asking - can we survive on Earth and should we colonise space ?

With his characteristic humour, the book is full of quirky quotes - for the question as to whether there is intelligent life elsewhere in the universe, he concludes "..it must be a very long way away otherwise it would have visited Earth by now. And I think we would've known if we had been visited: it would be like the film Independence Day".

In confronting the biggest threat to planet Earth, Hawking concludes that while an asteroid collision is possible, the last big event was sixty-five million years ago. The immediate threat is runaway climate change. As he concludes, "A rise in ocean temperature would melt the ice caps and cause the release of large amounts of carbon dioxide. Both effects could make our climate like that of Venus, but with a temperature of 250 degrees Celsius".

This book is made for a non-science reader with the extra treat being that it includes Hawking's work on black holes and the relationship between Einstein's General Theory of Relativity and the later theory of Quantum Mechanics  - explained in clear, simple language. This is a must read book confronting some of the major science and ethical questions of the era.

Anzac Day 2019

Australian War Memorial: Ambulances with wounded members, 9th Division, Adelaide 1943

On  25th April, as Australia commemorates and remembers those members of the community who served during various armed conflicts, particularly the fallen on the battlefield, there is also the need to recognise the many often badly wounded who survived the conflicts. Suffering either physical injuries or psychological effects or both for the rest of their lives, they often constitute twice the number compared to those lost in action.

During the First World War 1914-18, Australia's population was less than 5 million of which 416,809 men enlisted to serve. Of these 60,000 were killed, and 156,000 wounded, gassed or taken prisoner. The casualties and POWs combined constituted 51% of the Australian Imperial Force (AIF). A staggering number.

In the Second World War 1939-45, Australia had 993,000 serving in the armed forces from a population of 6.9 million. Of these 27,073 were killed in action or died with 23,477 wounded and 30,560 taken as prisoners of war. Of the POWs, 8,296 died in captivity mainly in Japanese camps.

Lest we forget.

Anzac Cove 1915: Wounded being transferred to Hospital ship Gascon

Easter - Jesus, eggs, Heaven and Hell

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Easter - the festival commemorating the resurrection of Jesus Christ from the dead - has several separate distinct elements which stretch over a full week from Palm Sunday to Easter Sunday. Easter also coincides with the Jewish festival of Passover. 

How much is actually known about Jesus ? His life, teachings and practices are drawn from the New Testament Gospels of Matthew, Mark, Luke and John. The archaeological evidence however for Jesus is non-existent although much effort has been spent over the centuries since his death (around 30AD) to find actual proof. 

After his resurrection Jesus ascended to Heaven, a form of existence to which all Christians are meant to aspire.  As academic Robyn Whitaker points out, the concept and understanding of Heaven is  fairly varied and most often relates to a 'paradise' which appears to be a description of the Persian Royal gardens.  The word for heaven in Hebrew (shamayim) and Greek (ouranos) also translates to the word for 'sky'.  It could be argued that this is more a cultural influence than a religious one.

The perspective taken on Hell is more diverse. The Old Testament merely refers to Sheol or a realm of the dead however the New Testament  has multiple terms - Gehanna, Hades, Tartarus or the Abyss. Whitaker sees this as more a case of the New Testament writers being influenced by both the Greek and Jewish cultures and incorporating concepts into their writings. Of interest Gehanna was a valley near Jerusalem which had a perpetually burning rubbish dump hence the association with wickedness and fire.

Easter eggs and Easter bunnies have little to do with the actual events of Easter and have their origins in Europe, the German Lutheran Church and some of the Eastern Orthodox Churches. This mainly involves the tradition of fasting during Lent and the painting of eggs in bright colours rather than making them from chocolate. Easter in essence is not about the Easter bunnies or chocolates.

Happy Easter !

The Reserve Bank and climate change

The March 2019 speech by the Deputy Governor of the Reserve Bank of Australia (RBA), Guy Debelle on climate change and the economy was something of a watershed moment for many commentators in the media. Here was a senior official of Australia's central bank acknowledging the serious impact that climate change could and almost certainly will have on Australia's economy in future years in stark contrast to negligible statements by the Australian Government.

Debelle's address to a public forum hosted by the Centre for Policy Development in Sydney follows closely similar comments by other key federal regulators, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).

What made Debelle's address so essential is that it was framed within the context of  economic models and monetary policy - the key instruments which the RBA uses to influence the Australian economy.  According to the RBA, when thinking about weather its important to see it in terms of a trend rather than cycles: "The impact of a trend is ongoing, whereas a cycle is temporary".  Frequency of climate events needs to be considered and how the economy adapts to increasing sudden shocks which affect demand and supply.

RBA has joined the Network for Greening the Financial System (NGFS) which is a group of central banks looking at climate issues and impact.

The speech can be accessed at the link below:
Address by the RBA Deputy Governor on climate change  

Earth Hour 2019 - Saturday 30 March 2019 - 8.30PM

Earth Hour link below:
Earth Hour 2019

Ancient Earth - 720 million years back in time

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Imagine the Earth in the Cryogenian period around 720 millions year ago. A new online tool has been developed which can do just this.  The Cryogenian period was  the second of the three periods of the Neoproterozoic Era extending from approx 720 million years to 635 million years ago.

Click the link below to access:
Ancient Earth

Share buybacks by corporations - in whose interest ?

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Over the past three years since 2016, there has been a marked increase in the number of announcements of share buy-backs from ASX listed companies. Buy-backs are where a stock exchange listed company literally makes an offer to purchase its own shares from its shareholders thus reducing the number of shares on issue in the market. This approach has often been in tandem with a company having excess capital or funds available to it as a result of the sales of other businesses (where there are other brands which the company can offload) or capital raisings which are no longer needed or a high return from business operations in the preceding year. But how sensible are share buy-backs and in whose interest do they occur ?

The oft stated justification from companies is that a buy-back creates value by reducing the number of shares on issue and are a way of returning capital to shareholders.  Little other information ever eventuates such as the overall rationale for the decision - what is the target price being sought ? What is the intrinsic value per share ? What is the timeline for the buy-back ? Some of the announced buy-backs have also resulted in little to no actual share purchases occurring hence the tactic appears to be for other reasons - such as placing a floor underneath the price of shares particularly if short sellers have been active in the market.

A raft of companies have been doing these buy-backs including CSL, Qantas, AGL, Navitas, CSR, Oroton, Platinum Asset Management, Cardno, QBE to name a few.

Management consultancy, McKinsey & Co, has challenged the value of share buy-backs in terms of using it as a method of improving earnings-per-share (EPS) or total return to shareholders (TRS), both of which are key revenue measures of a company's performance. McKinsey's have noted in one example that a company had pursued an aggressive share buy-back over several years and reduced around 20% of the share capital on issue and thus increased its earnings per share by 8% yet the overall net income for the business had continued falling. The overall revenue situation remained poor and the market discounted the company's shares by 40% relative to the market index. McKinsey's also commented that companies rarely time their repurchases well.

Shareholders would be well-placed to question the value of a company using investment capital or worse, debt financing, for share buy-backs rather than being used for revenue generation or 'growing the business'.

New Year 2019 beckons

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As 2018 ends and 2019 starts, there are strong grounds for caution as to what the next 12 months will be like and what events may transpire.

The latest Economic Conditions Snapshot, December 2018 from McKinsey & Co shows increasing pessimism  about the overall economic outlook from executives around the world whether reflecting on their own domestic situation or globally.  While there is some glimmer of optimism in India and Latin America, overall executives are glum about the next 12 months whether in developed-economies or emerging economies.

The key risks are defined as being related to policy and politics and are considered 'the most pressing threats'.  The most commonly cited examples being trade policy, a China economic slow-down and the United Kingdom's exit from the European Union. Transitions in political leadership and geopolitical instability are the second most cited concern. Of particular note, rising interest rates have largely fallen ranking only fifth of the five most pressing issues.

Happy New Year !

2018 - a year of shareholder voting strikes on corporate remuneration

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It's not surprising given the raft of allegations concerning the conduct of Australian banks at the Royal Commission into Banking, Superannuation and the Financial Services Industry' plus various scandals with other corporations, that shareholders are showing their displeasure at the level of remuneration paid to senior executives and directors on ASX listed companies.

Under the Australian Corporations Act 2001 (Section 300A), companies listed on the Australian Stock Exchange (the ASX), must present a remuneration report at every Annual General Meeting which sets out the policies for the amount of remuneration paid to key management personnel as established by the company's governing Board. Key management personnel are typically the Chief Executive Officer and senior executives including directors on the Board itself. The report must show the nature of the remuneration and exact value including salary, bonuses, short and long term incentives, options on shares and an explanation on performance hurdles which apply.

Since an amendment to the Act in 2011, there is now a two strikes voting power and re-election process for the Board itself should shareholders find the remuneration report repeatedly unacceptable. What this means is that for the first strike, a 'no' vote of 25 per cent or more of the votes cast rejecting the adoption of the remuneration report at the Annual General Meeting is needed. Should this occur the Board is required to provide an explanation on the proposed action the Board will take or a reason for taking no action on the remuneration report. If, in the following year at the next Annual General Meeting, a 'no' vote of 25 per cent or more occurs again, there must be a 'spill' motion of the positions of all members of the company Board responsible for the remuneration report at that meeting. 

For the spill motion of the Board to succeed, the resolution must be passed with 50 per cent or more of eligible votes.  Should the 'spill' motion succeed, within 90 days the directors must stand for re-election to the Board.

In 2018 there were a record number of first strikes for many companies -

Company Name and % of votes against the remuneration report:

National Australia Bank  88.1%
Mineral Resources  63.62 %
AMP  62.20%
Telstra Corporation  61.98%
Harvey Norman  50.63%
NRW Holdings  49.05%
Westfield Corporation 47.50%
QBE Insurance  45.60%
Goodman Group  45.46%
Tabcorp Holdings  40.40%
Myer Holdings 38.17%
Austal Limited  37.24%
Karoon  37.05%
Computershare  31.89%
Healthscope  29.29%
APA Group  24.96%

Many other companies received a high level of 'no' votes but not sufficient to reach the 25% threshold of a first strike. These include Ramsay Healthcare, MYOB, Japara Healthcare, Challenger Limited, JB Hi-Fi, Seek, Qube Holdings, IOOF Holdings, APN Outdoor, Coca-Cola Amatil. All of the companies with a first strike will need to work hard to avoid a second strike in 2019.

Christmas 2018

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Christmas, a time of celebration, a time for relaxation with family and friends. The Christmas celebration  itself is a mixture of orthodox religion, tradition and pagan ritual. The Christmas tree itself originates from medieval eastern Europe before being adopted in Lutheran Germany and thereafter across the Christian world mainly during the later 19th century. Decorations on the tree were much less flash and sparkly in the 19th and early 20th Centuries with coloured paper roses, wafers, apples and other small edible items. Only later were candles added and in the 20th century the Christmas tree became a light show in itself.

Wherever you may be, happy Christmas !